DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of
commercial high-resolution earth imagery products and services,
today reported financial results for the third quarter ended
Sept. 30, 2011.
Third quarter 2011 revenue was $81.3 million, up 1%
compared with the same period last year. Included in third quarter
revenue is $6.4 million of amortized revenue related to NextView,
the predecessor to the EnhancedView contract with the National
Geospatial-Intelligence Agency (NGA). Not included in third quarter
revenue is $23.2 million of deferrals related to the service level
agreement (SLA) portion of EnhancedView.
The company reported a third quarter 2011 net income of $1.1
million, or $0.02 per diluted share, compared with net income of
$800 thousand, or $0.02 earnings per diluted share, for the same
period last year.
Third quarter 2011 Adjusted EBITDA, a non-GAAP financial
measure, was $52.0 million, an increase of 16.0% compared with
third quarter 2010 Adjusted EBITDA of $44.9 million. Adjusted
EBITDA includes current-quarter deferrals related to EnhancedView
and, for both periods, excludes approximately $6.4 million of
amortized revenue related to NextView.
Cash Flow from Operations was $156.7 million for the nine months
ended September 30, 2011, up 40.2% compared with Cash Flow from
Operations of $111.8 million for the nine months ended September
30, 2010.
On Oct. 12, the company completed a refinancing of its debt,
entering into a senior secured credit agreement that provides for a
$500 million term loan facility and a $100 million revolving credit
facility. The company used these funds to repay the principal and
premium related to its 10.5% Senior Secured Notes, 100% of which
were redeemed and which have been retired. The company will use the
remaining cash proceeds for general corporate purposes, which may
include acquisitions and share repurchases. The impact of this
refinancing will be included in fourth quarter 2011 financial
results, and will include one-time charges related to the premium
paid for early extinguishment of the debt as well as deferred
financing fees.
“Our team did an outstanding job in the quarter positioning the
company for future profitable growth,” said Jeffrey R. Tarr,
President and Chief Executive Officer. “We won important new
contracts, including a new value-added services agreement with the
NGA and a large multi-year contract with a location-based services
provider. We grew our 12-month backlog at a double-digit rate both
year over year and sequentially, and increased our total backlog to
$3.14 billion. We are well positioned for a strong 2012.”
Third Quarter Business Highlights
- The company was awarded a one-year
contract by the NGA under the Enhanced GEOINT Delivery (EGD)
program. Through the program, DigitalGlobe will provide NGA with
continuous delivery of daily images via the web within 24 hours of
collect for specific, high-priority geographic locations.
- The company completed the first phase
of its remote ground terminal expansion, adding four new RGTs in
the quarter, increasing capacity and refresh by 51% and
accelerating delivery by up to 34%.
- DigitalGlobe and Ball Aerospace &
Technologies Corp. successfully completed the Critical Design
Review (CDR) for DigitalGlobe’s next generation remote-sensing
satellite, WorldView-3.
- The company launched a new online
geospatial intelligence service with NTT GEOSPACE in Japan, whose
GEOSPACE-CDS service features on-demand access to imagery sourced
from DigitalGlobe. The company also sold a subscription to its
FirstLookTM global event monitoring service to the United Nations
Institute for Training and Research (UNITAR).
2011 Outlook
The company’s full year 2011 outlook remains unchanged, with the
exception that expected diluted earnings per share now exclude the
impact of one-time expenses related to the company’s recent debt
refinancing.
- Revenue in a range of $330 million to
$355 million. This excludes any deferrals related to EnhancedView
and includes amortized revenue related to NextView.
- Diluted earnings per share of $0.10 to
$0.20, assuming an average diluted share count of approximately 47
million, and excluding the impact of one-time expenses related to
the company’s recent debt refinancing.
- Adjusted EBITDA of $223 million to $243
million.
- Capital expenditures for 2011 of
approximately $275 million.
Important factors, including those discussed in the company’s
filings with the Securities and Exchange Commission, could cause
actual results to differ from the company’s expectations and those
differences may be material.
Conference Call Information
DigitalGlobe’s management will host a conference call today at 5
p.m. EDT to discuss third quarter 2011 results.
The conference call dial-in numbers are as follows:U.S./Canada
dial-in: (866) 921-3936International dial-in: (706)
679-9623Passcode: 14792883
A replay of the call will be available through December 1st,
2011 at the following numbers:U.S./Canada dial-in: (855)
859-2056International dial-in: (404) 537-3406Passcode: 14792883
DigitalGlobe will also sponsor a live and archived webcast of
the conference call on the Investor Relations portion of its
website. Click here to directly access the live webcast.
Supplemental earnings materials are available on the company’s
website at www.digitalglobe.com.
About DigitalGlobe
DigitalGlobe is a leading global provider of commercial
high-resolution earth imagery products and services. Sourced from
our own advanced satellite constellation, our imagery solutions
support a wide variety of uses within defense and intelligence,
civil agencies, mapping and analysis, environmental monitoring, oil
and gas exploration, infrastructure management, Internet portals
and navigation technology. With our collection sources and
comprehensive ImageLibrary (containing more than one billion square
kilometers of earth imagery and imagery products) we offer a range
of on- and off-line products and services designed to enable
customers to easily access and integrate our imagery into their
business operations and applications. For more information, visit
www.digitalglobe.com.
DigitalGlobe is a registered trademark of DigitalGlobe.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein and other of our reports,
filings, and public announcements may contain or incorporate
forward- looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements relate to future events or our future
financial performance. We generally identify forward-looking
statements by terminology such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these terms or other
similar words, although not all forward-looking statements contain
these words.
Any forward-looking statements are based upon our historical
performance and on our current plans, estimates and expectations.
The inclusion of this forward-looking information should not be
regarded as a representation by us that the future plans, estimates
or expectations will be achieved. Such forward-looking statements
are subject to various risks and uncertainties and assumptions. A
number of important factors could cause our actual results or
performance to differ materially from those indicated by such
forward looking statements, including: the loss, reduction or
change in terms of any of our primary contracts; the loss or
impairment of our satellites; delays in the construction and launch
of WorldView-3; delays in implementation of planned ground system
and infrastructure enhancements; loss or damage to the content
contained in our ImageLibrary; interruption or failure of our
ground system and other infrastructure, decrease in demand for our
imagery products and services; increased competition that may
reduce our market share or cause us to lower our prices; our
failure to obtain or maintain required regulatory approvals and
licenses; changes in U.S. foreign law or regulation that may limit
our ability to distribute our imagery products and services; the
costs associated with being a public company; and other important
factors, all as described more fully in our filings with the
Securities and Exchange Commission, including our Annual Report on
Form 10-K.
We undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of
unanticipated events. Readers are cautioned not to place undue
reliance on any of these forward-looking statements.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income or loss adjusted for
depreciation and amortization, net interest income or expense,
income tax expense (benefit), loss on disposal of assets,
restructuring, loss on early extinguishment of debt, loss on
derivative instruments, non-cash stock compensation expense,
EnhancedView deferred revenue and EnhancedView outstanding invoices
not yet paid by NGA, and amortization of pre-FOC payments related
to NextView. EnhancedView outstanding invoices not yet paid by NGA
represent an irrevocable right to be paid in cash by NGA.
Adjusted EBITDA is not a recognized term under generally
accepted accounting principles (GAAP), in the United States and may
not be defined similarly by other companies. Adjusted EBITDA should
not be considered an alternative to net income, as an indication of
financial performance, or as an alternative to cash flow from
operations as a measure of liquidity. There are limitations to
using non-GAAP financial measures, including the difficulty
associated with comparing companies in different industries that
use similar performance measures whose calculations may differ from
ours.
Adjusted EBITDA is a key measure used in internal operating
reports by management and the board of directors to evaluate the
performance of our operations and is also used by analysts,
investment banks and lenders for the same purpose. Adjusted EBITDA
is also a key driver of the company bonus incentive plan. Adjusted
EBITDA is a measure of our current period operating performance,
excluding charges for capital, depreciation related to prior period
capital expenditures and items which are generally non-core in
nature, and including EnhancedView deferred revenue and
EnhancedView outstanding invoices not yet paid by NGA, and
excluding the amortization of pre-FOC payments related to our
NextView contract.
We believe that the elimination of material non-cash,
non-operating items enables a more consistent measurement of period
to period performance of our operations. In addition, we believe
that elimination of these items in combination with the addition of
the non-refundable EnhancedView deferred revenue and EnhancedView
outstanding invoices not yet paid by NGA, as well as amortization
of pre-FOC payments related to NextView facilitate comparison of
our operating performance to companies in our industry. We believe
this Adjusted EBITDA measure is particularly important in a capital
intensive industry such as ours, in which our current period
depreciation is not a good indication of our current or future
period capital expenditures. The cost to construct and launch a
satellite and build the related ground infrastructure may vary
greatly from one satellite to another, depending on the satellite’s
size, type and capabilities. For example, our QuickBird satellite
cost significantly less than our WorldView-1 and WorldView-2
satellites. Current depreciation expense is not indicative of the
revenue generating potential of the satellite.
Adjusted EBITDA excludes interest income, interest expense,
income taxes and loss on early extinguishment of debt because these
items are associated with our capitalization and tax structures.
Adjusted EBITDA also excludes depreciation and amortization expense
because these non-cash expenses reflect the impact of prior capital
expenditure decisions which are not indicative of future capital
expenditure requirements. Adjusted EBITDA excludes non-cash stock
compensation expense, because these items are non-cash expenses and
loss on derivative instrument and disposal of assets because these
are not related to our primary operations.
We use Adjusted EBITDA in conjunction with traditional GAAP
operating performance measures as part of our overall assessment of
our performance and we do not place undue reliance on this measure
as our only measure of operating performance. Adjusted EBITDA
should not be considered a substitute for other measures of
financial performance reported in accordance with GAAP.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Statements of Operations
For the Three MonthsEnded September
30,
For the Nine MonthsEnded September 30,
(in millions, except per share data) 2010
2011 2010 2011
Revenue $ 80.5 $ 81.3 $ 238.6 $ 240.1 Costs and expenses:
Cost of revenue, excluding depreciation and amortization 11.0 17.6
31.2 43.8 Selling, general and administrative 28.2 30.7 81.2 94.5
Depreciation and amortization 29.2 29.1
89.3 87.5 Income from
operations 12.1 3.9 36.9 14.3 Other income (expense), net – – – 0.1
Interest income (expense), net (10.0 ) (4.6 )
(30.6 ) (17.8 ) Income (loss) before income
taxes 2.1 (0.7 ) 6.3 (3.4 ) Income tax (expense) benefit
(1.3 ) 1.8 (3.5 ) 3.4
Net income (loss) $ 0.8 $ 1.1 $
2.8 $ – Earnings (loss) per share: Basic earnings
(loss) per share $ 0.02 $ 0.02 $ 0.06
$ 0.00 Diluted earnings (loss) per share $ 0.02
$ 0.02 $ 0.06 $ 0.00
Weighted average common shares outstanding: Basic 43.6
46.3 44.2
46.2 Diluted 46.3 46.7
46.3 46.8
DigitalGlobe, Inc.
Reconciliation of GAAP Net Income to
Adjusted EBITDA
(unaudited)
Three months endedSeptember 30,
Nine months endedSeptember 30,
(in millions) 2010 2011
2010 2011 Net income (loss) $ 0.8 $ 1.1
$ 2.8 $ – Depreciation and amortization 29.2 29.1 89.3 87.5
Interest (income) expense, net 10.0 4.6 30.6 17.8 Income tax
expense (benefit) 1.3 (1.8 ) 3.5 (3.4 ) Non-cash stock compensation
expense 1.7 2.2 4.6 11.2 EnhancedView deferred revenue 8.3 16.5 8.3
66.2 EnhancedView outstanding invoices not yet paid by NGA – 6.7 –
6.7 Amortization of pre-FOC payment related to NextView (6.4
) (6.4 ) (19.1 ) (19.1 ) Adjusted
EBITDA $ 44.9 $ 52.0 $ 120.0 $ 166.9
Adjusted EBITDA is not a recognized term
under generally accepted accounting principles (GAAP), in the
United States and may not be defined similarly by other companies.
Adjusted EBITDA should not be considered an alternative to net
income, as an indication of financial performance, or as an
alternative to cash flow from operations as a measure of liquidity.
There are limitations to using non-GAAP financial measures,
including the difficulty associated with comparing companies that
use similar performance measures whose calculations may differ from
ours.
Third quarter EnhancedView deferred revenue
includes $8.3 million invoiced in the second quarter of 2011 for
which cash was received in the third quarter of 2011.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Balance Sheets
(in millions, except share and per share data)
December 31,
2010
September 30,
2011
ASSETS CURRENT ASSETS: Cash and cash equivalents $
179.3 $ 148.7 Restricted cash 6.7 5.6 Accounts receivable, net of
allowance for doubtful accounts of $1.0 and $1.8, respectively 45.3
43.1 Prepaid and current assets 19.4 19.8 Deferred taxes
62.7 50.6 Total current assets
313.4 267.8 Property and equipment, net of accumulated depreciation
of $478.2 and $565.6, respectively 879.1 993.1 Goodwill 8.7 8.7
Intangibles, net of accumulated amortization of $7.7 and $7.4,
respectively 0.3 0.1 Aerial image library, net of accumulated
amortization of $21.1 and $23.7, respectively 1.9 8.9 Long-term
restricted cash 13.6 10.5 Long-term deferred contract costs 42.1
45.8 Other assets, net 7.2 5.8
Total assets $ 1,266.3 $ 1,340.7
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $ 15.0 $ 8.5 Accrued interest 6.2
15.5 Other accrued liabilities 26.3 44.4 Current portion of
deferred revenue 38.9 34.6
Total current liabilities 86.4 103.0 Long-term accrued
liability 6.0 1.4 Non-current portion of deferred rev
enue
246.2 309.6 Non-current portion of deferred lease incentive 4.6 3.6
Long-term debt, net of discount 346.1 348.0 Long-term deferred tax
liability 76.7 61.3 Total
liabilities $ 766.0 $ 826.9
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value;
24,000,000 shares authorized; no shares issued and
outstanding at December 31, 2010 and September 30,
2011
– –
Common stock; $0.001 par value;
250,000,000 shares authorized; 46,073,691 shares issued
and outstanding at December 31, 2010 and 46,314,205
shares issued and outstanding at September 30, 2011
0.2 0.2 Treasury stock, at cost; 44,039 shares at December 31, 2010
and 65,820 shares at September 30, 2011 (0.7 ) (1.2 ) Additional
paid-in capital 512.7 526.7 Accumulated deficit (11.9 )
(11.9 ) Total stockholders’ equity
500.3 513.8 Total liabilities
and stockholders’ equity $ 1,266.3 $ 1,340.7
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Statements of Cash Flows
(in millions)
For the Nine MonthsEnded September 30,
2010 2011
CASH
FLOWS FROM OPERATING ACTIVITIES: Net income
(loss) $ 2.8 $ – Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation and
amortization expense 89.3 87.5 EnhancedView deferred revenue – 74.5
Recognition of NextView pre-FOC payments (19.1 ) (19.1 )
Amortization of aerial image library, deferred contract costs and
lease incentive 5.5 8.7 Non-cash stock compensation expense 4.6
11.2 Amortization of debt issuance costs and debt discount 3.4 2.9
Deferred income taxes 2.3 (3.4 ) Changes in working capital, net of
investing activities: Accounts receivable, net 2.9 2.2 Prepaids and
other assets (1.0 ) (8.2 ) Accounts payable 0.3 4.1 Accrued
liabilities 20.7 0.6 Deferred contract costs (14.2 ) (8.0 )
Deferred revenue 14.3 3.7 Net cash
flows provided by operating activities 111.8
156.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress additions (25.6 ) (188.1 ) Other property,
equipment and intangible additions (7.5 ) (4.7 ) Change in
restricted cash 2.8 4.2 Net cash flows
used in investing activities (30.3 ) (188.6 )
CASH
FLOWS FROM FINANCING ACTIVITIES: Costs associated with initial
public offering (0.3 ) – Proceeds from exercise of stock options
9.6 1.8 Cash paid for treasury stock – (0.5 )
Net cash flows provided by financing activities 9.3
1.3 Net increase (decrease) in cash and cash
equivalents 90.8 (30.6 ) Cash and cash equivalents, beginning of
period 97.0 179.3 Cash and cash
equivalents, end of period $ 187.8 148.7
SUPPLEMENTAL CASH FLOW INFORMATION: Cash received (paid) for
income taxes $ 1.2 $ (1.2 ) Cash paid for interest, net of
capitalized amounts $6.8 and $6.0, respectively (11.8 ) (12.6 )
NON-CASH INVESTING AND FINANCING ACTIVITIES: Changes to
non-cash construction in progress and property, equipment and
intangibles accruals, including interest (20.6 ) (13.1 )
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